THE STUDY ON THE EFFECT OF CONTROL FACTORS FOR JOINT VENTURE SHARING INFORMATION USING ENTERPRISE RESOURSE PLANNING SYSTEM

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1 THE STUDY ON THE EFFECT OF CONTROL FACTORS FOR JOINT VENTURE SHARING INFORMATION USING ENTERPRISE RESOURSE PLANNING SYSTEM 1 HYO-KYUNG KIM, 2 WON-HEE LEE* 1 Tourism Management of Korea Tourism College, 17306, Korea 2 Subdivision of Business Administration, Kyung Nam College of Information and Technology, 47011, Korea 1 hyokyung_kim@hanmail.net, 2 leewh@eagle.kit.ac.kr ABSTRACT This empirical study is to investigate the effects of commitments (calculative commitment, affective commitment) and control types (output, process, and social), which are relational characteristics between partners in international joint venture, on corporate performance. Today almost companies have adaptive their own ERP system. When companies which using ERP system want to delivery information from cooperate companies without information bias. Especially, companies which have cooperate companies concern about information quality because company send misinformation to cooperate companies, they cannot make the right decision. Joint venture is popularly spread in the world. Sharing information is really important thus many joint ventures have built their local ERP system and sharing information each other s. According to the results of this research, affective commitment has positive effect on all the output control, process control, and social control. Whereas, calculative commitment has positive effect on the output control and process control only. But neither output control nor process control has positive effect on the results Keywords: ERP System, Information Bias, Joint Ventures, Information Quality Assurance, Information Sharing, Affective Commitment, Calculative Commitment 1. INTRODUCTION International joint venture is a very important strategic implementation through which a corporation can complement its weakness with the capability of its partner as well as securing some flexibility to the advantage of its own organization[1]. A corporation thereby mitigates corporate risk, sharing information resources and costs with its partner, and also has an opportunity to participate in developing new profit sources with enhanced competiveness from the international collaborations using Information Technology [2]. International venture capital is known as one of important ways to overcome unfamiliar local environments when companies try to expand their business abroad. To this end, there are a lot of ongoing studies on international joint ventures, and these studies can be classified into two focuses, ex ante factors for structuring alliance and ex post factors for managing alliance. Partners that participate in the joint venture with their own strategic objectives can be seen to think it necessary to take control over the management of their collaborations with their partners to achieve their objective. Figure.1: New Information Sharing Model Source:

2 =information+sharing&tbm=isch&tbo=u&source=univ &sa=x&ved=0ahukewje98zi0q7vahvge7wkhvtycla QsAQINQ&biw=1366&bih=668#imgrc=ZPlkonCVmhnr 1M:&spf= That is, having control over their collaborations is absolutely a necessary element to achieve their strategic objectives, from the perspective of each partner. In existing studies, however, no sufficient attention has been given to control over collaboration for joint venture. And the reasons can be as follows: first, because it can be seen that ex anti agreed contractual provisions bind respective parties, thereby making the ex post control unnecessary. Second, because as with any joint venture, for a business that assumes pro rata ownership, respective share of each party is considered to have controlling power which can affect their joint ventures. Finally, how international joint venture sharing important information using ERP system. In the study, therefore, we classify the control into 4 five factors based on existing studies, as follows: affective commitment, calculative commitment, Output control, Process control and Social control, and then we looked into their causal relationships each other based on the Information Technology. 2. LITERATURE REVIRW Joint investment takes place between two or more independent corporations from difference countries that set up joint venture in which they participate in the ownership and management of the joint venture. Therefore ERP system helps sharing information each joint enterprises. A joint venture offers an opportunity to use their knowledge and capability overseas [3]. The definition of joint venture varies depending on authors. Defined from business perspective, it is a certain corporation set up by two or more joint venture partners with different nationality each other, in the management of which they participate, whereas seen from the perspective of substantialism, it is defined as a corporation set up by legally two different entities in which they possess their own pro rata share and share managerial decision making[4]. A key point of these studies is mainly normative discussion that explains joint venture structure for maximization of economic performance or for efficient/effective achievement of strategic objectives[5, 6]. And representative theoretical backgrounds of such studies include transaction cost theory, resource dependency theory, resourcebased theory, real options theory, and strategic choice theory. And the fact that the results of such studies investigate such elements that deserve careful attention provides important implications from the perspective of strategic utilization of partnerships. It can, however, be said that there are not enough positive implications from managerial perspective because they emphasize only ex anti factors, economic benefit and cost, and strategic application for joint venture. Second, studies focusing on ex post management of joint venture investigate behavioral dimensions of their partners and how to deal with these factors, with their focus on trust building and maintaining, commitment to joint business, collaboration with partners, and the investigation of cause and resolution of conflicts with partners, and the control issue of joint venture[7, 8]. Existing studies on international joint investments emphasize securing controlling power to achieve strategic objectives of joint ventures[9]. In organizational level, commitment is voluntary intention by partners to make their best efforts for inter-organizational relationships[10], and they are defined as continuous desire to maintain valuable relationships[11]. The concept of commitment varies depending on authors, but commitment in this study is classified as calculative commitment and affective commitment. Calculative commitment decides whether maintain relationships considering cost and benefit derived from the relationships, whereas affective commitment is defined as alliance relationships, and therefore as a sense of unity with partners[12]. Mowday et. Al.[13] defines organizational commitment as tendency to identify with their organization and to make commitment to their organization argues that such concept constitutes belief in and acceptance of organizational objectives and values, efforts to achieve organizational objective, and willingness to remain a member of the organization. Table 1: Theoretical division of international joint venture business economic Organizational division approach approach 5933

3 Focus of Research Theoretical foundation Researcher Focusing on the lexical formation factors of the alliance formation: 1 Identifying the relationship between the ownership structure and alliance performance, 2 Economic benefits and costs of the joint venture, and 3 Emphasis on the strategic use aspect of the alliance Transaction cost theory, resource based theory, game theory, etc. - Hennart(1988) [14] - Hamel et al(1989) [15] - Kogut & Singh(1988) [16] Focusing on postmanagement after forming partnerships: 1 Establishing and maintaining trust among partners, 2 Commitment to partnership business, 3 Cooperation among partners, Cause of conflict and solution, 4 Control of partnership to achieve strategic goals Social exchange theory, network theory, etc. - Doz & Hamel(1998)[8] - Bucklin & Sengupta(1993) [17] - Morgan & Hunt(1994) [18] The study of [19] defines a partnership in the computer industry as an intentional strategic relationship between two independent firms that recognizes the sharing of goals, the pursuit of mutual benefits, and the high level of interdependence, And verified the factors affecting it. The success of the partnership was measured by the satisfaction of the partnership marketing support, the satisfaction with the revenue, and the partner mutual sales volume. This study shows that commitment and mediation have a relative importance as a determinant of the success of these alliances. Therefore, all companies participating in a joint venture must devote themselves to the business to ensure genuine cooperation, and high levels of commitment provide a situation where both partners can acquire personal and collective goals [20]. It is expected that high level commitment will have a very high relationship with the success of the partnership because the committed partners will do their best to each other's business relations and solve the short term problems from the perspective of acquiring long-term goals [21]. Control is defined as the process by which the components of a system are more predictably structured through the set criteria in seeking a desired goal or an expected situation[22]. In other words, the purpose of control is to ensure that the ultimate goal of the organization can be achieved by acting as expected. Therefore, firms can use controls to make their achievement more predictable, and they can increase their confidence that they will have the expected results through control [23]. There is a need to distinguish between 'control mechanisms' and 'control levels' in relation to control. While a control mechanism is an organizational process designed to determine and influence the tasks that an organization member needs to perform, the level of control must be such that one party is assured that the partner will behave in the proper way as a direct result of the control process [23]. In this conceptual distinction, the control mechanism helps to achieve the appropriate level of control, and appropriate control mechanisms can make the achievement of the goal more predictable. In summing up these facts, the engagement committed by the joint venture partner can be expected to be more effective when accompanied by appropriate control mechanisms. In other words, the voluntary and unilateral involvement of one partner acts positively on the level of cooperation, and the effect becomes greater when appropriate control mechanisms work. Control also has its object. Thus, the establishment of appropriate control mechanisms depends on what the target is. Control mechanisms can be broadly divided into formal control and informal control, while formal control mechanisms focus on specific goals to achieve through control, whereas informal control focuses on operational processes and environments that reach the expected outcome It is the control method. The official control mechanism is either a focus on the behavior of the expected member (process control), a focus on the expected outcome (control of output), or a control method in which the target of the control and the goal are clearly determined. Informal control, on the other hand, is an informal control that induces behavior toward achieving goals through the sharing and mutual 5934

4 understanding of values, beliefs, and organizational socialization among members (social control ). On the other hand, commitment is divided into computational commitment and emotional commitment. Calculation commitment determines the level of commitment and its level, taking into account relational benefits and relational costs [24]. Emotional commitment refers to efforts to maintain the relationship through a sense of unity with the partner. In other words, they feel a sense of unity through their acceptance of the values and beliefs of their partner organizations, and show their willingness and willingness to achieve their goals voluntarily [25]. In the light of these characteristics, the computational commitment can be more effective when the partner's (cooperation) action that can affect the relationship benefits and costs can be more specifically regulated, The level of confidence of the parties involved is high. On the other hand, emotional commitment has a higher level of confidence in the partner's (partnership) behavior when organizational socialization is carried out to share organizational values and beliefs and mutual understanding. Taking these arguments together, the following hypotheses are possible. 3. RESEARCH MODEL AND HYPOTHESES H1: Affective Commitment has a positive influence on the Output Control H2: Affective Commitment has a positive influence on the Process Control H3: Affective Commitment has a positive influence on the Social Control H4: Calculative Commitment has a positive influence on the Output Control H5: Calculative Commitment has a positive influence on the Process Control H6: Calculative Commitment has a positive influence on the Social Control H7: Output Control has a positive influence on the Results H8: Process Control has a positive influence on the Results H9: Social Control has a positive influence on the Results Figure.2: Research Model and Hypothesis 4. RESULTS 4.1 Sampling and Characteristic The frequency analysis for the characteristics of samples for international joint ventures is as follows: for industry type, the number of manufacturing companies is 85 (60.3%), non-manufacturing companies (excluding services companies) is 56 (39%), 29 less than manufacturing companies, and the number of overseas markets is less than 5 for 67 companies(68.7%), 6-10 markets for 16 (11.3%), 11~20 markets for 12 (8.51), and 21 or more markets is for 16 (11.3%) companies, as of Table 2: General characteristics of the sample division Sum Ratio(%) manufacturing Industrial Type Nonmanufacturing industry Number of overseas markets (As of the end of 2013) Overseas market share in total sales (as of end- 2013) Total number of international projects jointly operated with foreign Less than times 6 ~ 10 times ~ 20 times More than 21 times Less than 50% More than 50% Less than 5 times More than 6 times

5 partners Industrial life cycle of a sample firm Total number of jointventure employees Your equity Introduction Growing season Maturity ebb tide Less than ~ or more Less than 49% (minority interest) 50% (equal share) 51% or more (majority stake) Exploratory Factor Analysis Results In this study, the reliabilities of the exploratory factor analysis and research tool were analyzed using SPSS Windows 18.0 and Cronbach s Alpha (α >= 0.7) were used to evaluate the reliabilities. Analysis was conducted using Principle Component Analysis for factor extraction method and the varimax rotation for factor rotation method, and the questions were made in consistent with the purpose of this study. Also, single dimension factor analysis was conducted using Factor Loading (FL >= 0.6), which represents correlation between evaluation factors. First, as a result of the Exploratory Factor analysis for the questions of survey questionnaire using SPSS 18.0, 6 factors were deduced and while Factor Loading represented more than 0.6 for Affective Commitment, Calculative Commitment, Output Control, Process Control, Social Control, and Results. Table 3: The Rotated Component Matrix Factor Loading Cronbach s α Q5.870 Q4.845 Q M2.727 M3.706 K2.906 K1.852 K H1.526 H3.516 E1.854 E2.839 E3.811 H2.512 D1.894 D3.881 D2.868 L2.819 L4.781 L1.724 M Table 4: Verification of KMO and Bartlett Kaiser-Meyer-Olkin measure of.884 suitability for standard formation Approximate chi square Bartlett's Degree of Sphere 210 freedom Formation Test Probability of.000 significance Table 5: Communality Early extraction D D D E E E H H H K K K L L L M M M Q Q Q Confirmatory Factor Analysis Results Since in this study, to be recognized the internal validity, the measuring questions suggested by previous researches were modified to fit the purpose of this study and verified by relevant experts, the internal validity was considered to be recognized. First, the validity of the measuring 5936

6 tools was verified by conducting confirmatory factor analysis using AMOS 18.0 for the factors extracted from Exploratory Factor Analysis. The consistency among research concepts and measuring variables was identified using maximum likelihood method and to verify validity, Standardized Factor Loadings (FL 0.6), Squared Multiple Correlations (SMC 0.5), Standardized Residual Covariance (-2.58 SRC +2.58), and Construct Reliability (CR 0.7) and Average Variance Extracted (AVE 0.5) were used. In addition, in the Confirmatory Factor Analysis, the significance of the research model was reviewed using GFI, AGFI, RMR, NFI, CFI, TLI, and RESEA, which are the overall fit evaluation indices. And finally, to verify the hypothesis suggested in this study, the path coefficients among theoretical variables were verified using Structure Equation Model. In the Confirmatory Factor Analysis results, while the Standardized Factor Loadings, the Squared Multiple Correlations, the Standardized Residual Covariance, these were satisfied the standard, the overall fit evaluation indices like GFI, AGFI, RMR, NFI, CFI did not satisfied the standard( ²= df=55 p<0.001, RMR=0.055 GFI=0.911 AGFI=0.854 IFI=0.981 CFI=0.980). 4.4 Structural model analysis Based on the previous papers behind the research model, we hypothesized one is Affective Commitment has a positive influence on Output Control, Process Control, and Social Control another is Calculative Commitment has a positive influence on Output Control and Process Control, and the other is Social Control Results, Affective Commitment Calculative Commitment 4.5 Structural model analysis Based on the previous papers behind the research model, we and hotel work process. Second, the hospital information system has a positive influence on hospital strategy, hospital employee satisfaction, hospital work process, and hospital results. Finally, strategy, employee satisfaction, and work process a have positive influence on results both hospital and hotel. To test the research hypotheses and identify the casual relationships between the five Categories, we used AMOS 18.0 in Structural Equation Model(SEM). When the measurement model is satisfied, this structural model in Figure 1 can be tested [26]. The fit statistics of the hotel model indicate that the chi-square of the hotel model is with a d.f. of 5. GFI is 0.830, AGFI is 0.287, NFI is 0.732, CFI is and RMR is were poor. Therefore, we modified the initial casual model with the Modification Index. First, the largest M.I. is for the path from Affective Commitment to Calculative Commitment. Second, The largest MI is for the path from Output Control to Social Control. Finally, the path from Calculative Commitment to Results. After the initial model is modified by adding a path, the fit statistics are improved with with a d.f. of 3. GFI is 0.972, AGFI is 0.803, NFI is 0.963, CFI is and RMR is According to the findings of the investigation, the Calculative Commitment has a positive influence on the Social Control (H6), Output Control has a positive influence on the Results (H7), and Process Control has a positive influence on the Results (H7) were rejected. Figure.2: The Results of Hypotheses 5. DISCUSSION AND CONCLUSION The results of the study are as follows: first, this empirical study is to investigate the effects of commitments (calculative commitment, affective commitment) and control types (output, process, social), which are relational characteristics of partners in an international joint business, on a corporate performance. In existing studies on recent joint businesses, normative discussions have been a mainstay, investigating maximization of economic performance and joint venture structure for efficient/effective achievement of strategic objectives [6]. In addition, joint venture companies are sharing data each other using ERP system. Today, many Korea companies have their own ERP system and sharing data with partners. As for an investigation into behavioral dimensions and how to consider such factors, a study is carried out in the areas of trust building and maintaining between joint partners, partner s commitments to joint businesses, collaboration between partners, cause for and solution to conflicts, and control over 5937

7 Table 6: Total Variance Explained Initial eigenvalue The extraction squared load value Rotation sum of squares Sum Dispersion Accumulate Sum Dispersion Accumulate Sum Dispersion Accumulate Table 7: Results Of Hypotheses Hypotheses Path FL p-value Hypothesis Supported H1 Affective Commitment Output Control ** H2 Affective Commitment Process Control ** H3 Affective Commitment Social Control ** H4 Calculative Commitment Output Control * H5 Calculative Commitment Process Control * H6 Calculative Commitment Social Control ns H7 Output Control Results ns H8 Process Control Results ns H9 Social Control Results ** H10 Affective Commitment Calculative Commitment ** H11 Output Control Social Control ** H12 Calculative Commitment Results ** joint venture to achieve strategic objectives[7, 8]. But there has been no empirical study on the effects of control types on relational characteristics and joint performance between partners in international joint business, moderation effects by relational control types between joint venture partners of the study can provide some implications for future studies. Second, considering the fact that there are a wide range of strategic international joint ventures and alliances between corporations these days, it is, therefore, meaningful that the study should complements weak areas of existing studies on joint investment business to contribute to establishing a strong theoretical basis for joint venture study, by presenting a model that demonstrates the effects of the moderation of control over joint venture management between corporate partners, focusing 5938

8 on the management of international joint businesses, which is one type of various alliances these days. Figure.3: A Companies ERP System For Data Sharing And Management Third, the study, based on empirical investigation, can provide practical implications for domestic corporations that are preparing for an international venture business in uncertain domestic, international industry environments, by presenting a research model and empirically verifying relationships between these variables of the model in which the types of corporate control (output control, process control, social control) affect the performance of a joint venture. Fourth, the study is inter-disciplinary study in which the characteristics of corporations that participate in an international joint business are examined with concepts of inter-organizational commitments, cooperation, and conflicts which are mainly dealt with in disciplines of organizational behavior and social psychology. Fifth, the study provides implications for ex anti or ex post strategic control method by identifying the importance of control in managing a joint business. REFRENCES: [1] Barney, J., Gaining and Sustaining Competitive Advantage, Pearson Group., (2013). [2] Yoo, S. H. and LEE, E. G., A Study on Effect of International Strategic Alliance on Firm valuation, Korea Trade Review, Vol. 30, No. 1, 2005, pp [3] Sirmon, D. G. and Lane, P. J., A model of culture differences and international alliance performance, Journal of International Business Studies, Vol. 35, 2004, pp [4] Geringer, J. M. and Herbert, L., Control and performance of International joint Ventures, Journal of International Business Studies, Vol. 20, Summer, 1989, pp [5] Hennart, J. F., A Transaction Costs Theory of Equity Joint Ventures. Strategic Management, Journal, Vol. 9, 1988, pp [6] Geringer, J. M. and Herbert, L., Measuring performance of international joint venture, Journal of International Business Studies, Vol. 22, No. 2, 1991, pp [7] Bucklin, L. P. and Sengupta, S., Organizing successful co-marketing alliances, Journal of Marketing, Vol. 57, No. 2, 1993, pp [8] Doz, Y. L. and Hamel, G., Alliance advantage: The art of creating value through partnering, Harvard Business Press, [9] Kumar, S. and Seth, A., The design of coordination and control mechanisms for managing joint venture-parent relationships, Strategic Management Journal, Vol. 19, No. 6, 1998, pp [10] Porter, L. R., Steers, R., Mowday, R. and Boulian, P., Organizational Commitment, Job Satisfaction, and Turnover Among Psychiatric Technicians, Journal of App lied Psychology, Vol. 59, 1974, pp [11] Moorman, C., Zaltman, Gerald and Deshpande, R., Relationships Between Providers and Users of Market Research : The Dynamics of Trust Within and Between Organizations, Journal of Marketing Research., XXIX, 1992, pp [12] Mowday, R. T., Reflections on the Study and Relevance of Organizational Commitment, Human Resource Management Review, Vol. 8, No. 3, 1999, pp [13] Mowday, R. T., Porter, L. W. and Steers, R. M., Employee-organizational linkages: The Psychology of commitment, absenteeism, and turnover, New York: Academic Press, [14] Hennart, J. F., A Transaction Costs Theory of Equity Joint Ventures, Strategic Management Journal, Vol. 9, 1988, pp [15] Hamel, G., Y. L. Doz. & C. K. Prahalad, Collaborate with your competitors and win, Harvard Business Review, Vol. 67, No. 1, 1989, pp [16] Kogut, B. & H. Singh, The effect of national culture on the choice of entry mode, Journal of International Business Studies, Vol. 19, No. 3, 1988, pp [17] Bucklin, L. P. & S. Sengupta, Organizing successful co-marketing alliances, Journal of Marketing, Vol. 57, No. 2, 1993, pp [18] Morgan, R. M. & S. D. Hunt, The commitment-trust theory of relationship marketing, Journal of Marketing, Vol. 58, No. 5939

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